Sears, Kmart owner to close up to 120 stores

Nation's largest department-store chain hasn't released specifics

This Nov. 9, 2011 file photo, shows signs at a Kmart store in New York. Sears Holdings Corp. said Tuesday that it plans to close 100 to 120 of its Sears and Kmart stores as its holiday sales disappointed and it looks to reduce costs. (AP Photo/Mark Lennihan)
— AP

This Nov. 9, 2011 file photo, shows signs at a Kmart store in New York. Sears Holdings Corp. said Tuesday that it plans to close 100 to 120 of its Sears and Kmart stores as its holiday sales disappointed and it looks to reduce costs. (AP Photo/Mark Lennihan)
/ AP

After lackluster holiday sales, Sears Holdings, which operates 16 local Kmart and Sears stores, said Tuesday that it is planning a massive restructuring that will include closing up to 120 stores nationwide, but the specific locations have not been announced.

At the same time, the company is continuing to convert its Sears Essentials stores back to Kmarts — including the one in Mission Valley — because the format didn’t resonate with shoppers.

Analysts said that the largest U.S. department-store chain has let its stores get too shabby and that many consumers prefer shopping at rivals such as Target and JCPenney.

Sears Holdings said Tuesday that in the coming year it will close between 100 and 120 U.S. Sears and Kmart stores to raise cash. The company would not discuss how many, if any, jobs would be cut.

San Diego County has six Sears stores, two Sears Outlet stores and two Essential stores (including the one in Mission Valley that’s becoming a Kmart on Feb. 22); and six Kmart stores.

The closings have fueled speculation about whether the 125-year-old retailer can turn itself around despite its efforts to drum up business. In recent months it offered deep-discount Black Friday sales — such as 50 percent off Kenmore appliances — and tried new ideas such as offering live Christmas-tree shipping to online shoppers at Sears.com. The company has also been promoting new brands such as its Kardashian collection and the affordably priced designer line UK Style by French Connection.

A hint that trouble might be brewing came in mid-December when Sears Holdings unexpectedly announced that 260 stores would stay open until midnight through Dec. 23. In an internal memo Tuesday to employees, CEO and President Lou D’Ambrosio said that the retailer had not “generated the results we were seeking during the holiday.”

The closings are the latest and most visible in a long series of moves to try to fix a company that has struggled with falling sales as rivals like Walmart and Target spruced up their looks and turned into one-stop shopping sources.

At the Chula Vista Center mall, for example, the Sears store hasn’t been upgraded in at least a decade. Shoppers stand in lines outlined on the floor with worn plastic tape. Meanwhile, the JCPenney in the same mall recently underwent a $3 million renovation, creating mini-boutiques and installing a Sephora beauty “store within a store.”

The company said that the store closings will generate $140 to $170 million in cash from inventory sales. It expects the sale or sublease of real estate holdings to add more cash.

Billionaire investor Edward Lampert purchased Kmart out of bankruptcy in 2003 and bought Sears, Roebuck & Co. a year later. Since 2004 Sears Holdings — which operates both Kmart and Sears stores — has watched its cash and short-term investments drop from $2.09 billion to $700 million.

The company attempted to compete with Target and Walmart, without much success. In 2005, it converted about 400 Kmarts to the mid-size “Essentials” format to offer the usual appliances, clothing and home electronics along with convenience items such as health and beauty items, snacks and pet supplies.

Since then, the chain has closed or converted most of the Essential stores have, and eight more of them are slated to become Kmarts early in 2012, said Sears Holdings spokeswoman Kimberly Freely. That will leave just 44 U.S. Essentials stores.

The Mission Valley store generally had few cars in its parking lot in the shopping center with its Ross Dress For Less, Sports Authority and Wendy’s restaurant. Consumers on the review site Yelp criticized its customer service and said that prices were too high. “We were the only people in the entire store for at least 15 minutes,” said one reviewer.

The Mission Valley store is liquidating its inventory with an ongoing clearance sale, and will become a Kmart in late February.

In a key gauge of a retailer’s health, same-store sales at Sears and Kmart stores fell 5.2 percent in the eight weeks ended Sunday, Sears Holding said Tuesday. By contrast, such sales in the department-store sector as a whole will climb an estimated 4 percent in November and December, compared with the same period a year ago, according to the International Council of Shopping Centers.

Some industry experts say part of the problem Sears is facing is that its core customers are struggling with unemployment or stagnant wages. But the bigger issue, analysts say, is that Sears hasn’t invested in remodeling, leaving its stores uninviting.

The Hoffman Estates, Ill., company has more than 4,000 stores in the U.S. and Canada.